‘Mini-bonds’ are a relatively new method for companies large and small to raise capital, and typically offer an interest rate of between 6 per cent and 8 per cent a year – well ahead of those offered by savings accounts.

The return may be even higher if the investor elects to take their return in the form of goods or services; for instance, coffee chain Taylor St Baristas offered investors the choice of an 8 per cent cash return, or 12 per cent store credit, for an investment of £500.

The bonds are now offered by well-known retailers such as River Cottage, Hotel Chocolat and John Lewis, and have proven extremely popular with investors and businesses alike; the River Cottage offer, launched on a crowdfunding website, raised £1m in less than 36 hours.

However, the FCA has warned that the bonds are not covered by the Financial Services Compensation Scheme; in the event of an issuer going bust, investors could lose some or all of their money. As a result, the FCA believes it is misleading to compare ‘mini-bond’ interest rates with those offered by savings accounts, where funds are protected by the FSCS.

“Mini-bonds are illiquid and can be high-risk, as the failure rate of small businesses is high,” a spokesperson for the Authority said. “Firms are failing to make clear that mini-bonds are investments that place investors’ capital at risk, and are not deposit-based or capital-protected products.”